“Super original name, you guys…” – Jeff
Hey there carnivores,
Markets were down on Tuesday after a pretty volatile day.
And today we’re talking about Walmart doing its best Amazon impression.
Jeff & Jason
People of Walmart+
Look out Bezos, Doug McMillon is coming for yo neck.
Walmart will launch Walmart+ later this month. What’s that you say? Oh, just a subscription-based ripoff of Amazon Prime.
$WMT shares rose 6.78% on the day, while Amazon’s fell 1.86%.
Gimme the deets
The program will have an annual cost of $98, which is a few bucks shy of Amazon’s $119 membership fee. Walmart knows a thing or two about rolling back prices, after all.
As a member of the + club, users will have access to same-day shipping for groceries, gas discounts at Walmart’s stations, and early access to product deals.
Members will also have reserved delivery slots and get notifications if spots open up, which would be especially useful if this whole pandemic thing continues, as deliveries were delayed due to higher volume.
There are also plans to launch a video entertainment piece to the membership, but that’s like saying I’ve been planning to ‘get in shape’ for summer.
The bottom line…
But is Wally World fifteen years too late and a buck short?
That’s right, Amazon Prime launched fifteen years ago and has a very loyal clientele. Seriously, in a recent poll, Americans are more likely to link their identity to being a Prime member vs. a CrossFitter or having airline status. Personally, if I can’t order something and get it in two days, then I’m just not buying it…
Not to mention more than half of Walmart’s top spending families have Prime memberships as well, so McMillon and the people of Walmart have their work cut out for them.
While Walmart’s master plan sounds all well and good, it still has a long way to go before Jeffrey Commerce is even remotely concerned. “Call me when you buy a self-driving car company…” Even with Walmart’s sales reaching record highs thanks to COVID-19 this year, Wally World’s e-commerce presence was still only an eighth of Amazon’s.
☑️ Sunshine daydream.
The top two names in solar power are joining forces to become the Chip and Joanna Gaines of the rooftop solar power game.
Sunrun is acquiring Vivint Solar for $1.6B in an all-stock deal amid the backdrop of an industry that is beaten down thanks to (what else?) coronavirus. Because people don’t want to make their houses uglier when they are looking at them all day…
The Tesla competitor will have a combined 500k customers… which is not a typo…. that many people actually have solar panels on their homes.
☑️ Not cool
Deutsche Bank was hit with a $150M fine by NY state financial regulators “for significant compliance failures” in the bank’s dealings with Jeffrey Epstein.
The German bank should have done a better job of monitoring some super sketchy transactions in and out of Epstein’s bank accounts. Apparently, there were hundreds of transactions totaling millions of dollars that could be tied to child-trafficking and a litany of other disturbing sh*t performed by the investor, who definitely killed himself, and was certainly not murdered. Seriously.
It HAD to be DB, didn’t it?
☑️ Straight from the Scripps. Why, so, Sirius?
SiriusXM will acquire Stitcher Podcasting from Scripps for $300M. Stitcher, in case you’re unaware, is the podcast company behind ‘Conan O’Brien Needs a Friend’ (don’t we all) and ‘Freakonomics Radio’. It has a free podcast app and offers a premium, ad-free version for $4.99 per month.
Sirius makes the majority of its cash money from subscriptions to its satellite service, but has hopped aboard the diversification train recently. In 2018 it bought Pandora for $3B, and last year it inked a deal with Disney for an exclusive Marvel podcast.
☑️ At long last. Peter Thiel’s controversial data analytics company Palantir Technology filed paperwork with the SEC to go public. It has flirted with the idea for the past five years but apparently figured there’s no time like the present.
Peter Theiel co-founded Palantir in 2004, but the company has yet to turn a profit. It’s private valuation has reached as high as $20B. The secretive company will likely follow Spotify’s and Slack’s lead with a direct listing.
It’s hands-down one of the top questions I hear from new angel investors.
How many startups should I be investing in?
And all too often…
I see one BIG misconception.
(I blame ultra-successful startups like Uber and Airbnb for it.)
And the ridiculous returns they brought to investors…
People seem to think that startup investing is all about unicorn hunting — searching for that one perfect deal that will make them millions.
They end up missing opportunities and put all their eggs in one basket.
Don’t get me wrong, I too want to be an early investor in the next Facebook!
But I believe there’s a much better strategy to increase your odds of hitting on the next mega-startup and some other winners along the way.
And I share this very strategy with you in my latest write-up.
Instead of swinging for home runs and striking out, you could be hitting singles and doubles and winning the game.
The truth is, long-term profits in startup investing come from throwing out a large net and investing in many companies.
Like with any other type of investment, a startup investment should be just one part of an entire portfolio. Spread the money around helps keep the chances of success high.
Angel investing is a numbers game. If you want to win you need a strategy, startup diversity, and a consistent deal-flow.
Statistics show that the number of deals is more important than the quality of any single deal.
Don’t take this the wrong way… due diligence and deal quality are still of utmost importance.
But trying to find a single “perfect” startups to ride through to riches isn’t the right approach.
According to the study, Startup Growth and Venture Returns by AngelList, investors increase their returns by broadly investing in every credible deal they find instead of only the best deals they find.
The overall market or index of startup opportunities beats the returns of 90% of startup investors, even experienced ones.
What does this mean?
For starters, it means the market of private companies — pre-IPO companies — is incredibly healthy. Also, it shows us that investing in more startups can increase our chances of success.
Now, you don’t need to go investing in hundreds of companies a year to turn a profit. There are methods you can use at a smaller scale, even for beginners.
We can start to base our investment strategy around two simple facts.
Understanding this, the name of the game is making sure your wins can cover your losses.
Based on data from successful angel investors, the magic number of startups to make this work is 10. Let me break it down.
If you invest in 10 startups, on average, 4 of them will outright fail. No returns, your money is gone.
Now we have 6 left. What happens with those? Well, about 5 of them will break even or give you a small profit.
Finally, that remaining 1 startup will be a success. This means big returns. On average this win will be 10 to 30 times the initial investment, but it could be upwards of 100 times.
So we make 10 investments and only 1 is a win?
Yes, but here’s the thing — that one winner pays for all of your losses and nets you a hefty profit.
If you only invest in 1 or 2 startups, the chance that one of them will be a success is low. Most likely you will lose your investment and be discouraged and unable to reinvest.
This is why most serious angel investors will always have between 10 and 25 investments at any given time. You need to play the numbers game to win.
Hopefully, by now you understand that angel investing isn’t about sitting around waiting for “The Big One”. The more solid companies you invest in, the greater your chances of success.
The exact number of startups you should invest in depends on your net worth, risk tolerance, and individual preference. Investing in more companies is better, but only to a limit. Your angel investing strategy needs to fit with the rest of your finances.
According to the Center for Venture Research, most Angel investors have between 5-25% of their net worth invested into startups. Depending on your net worth and deal-flow, this could be 5, 10, or 100 startups.
Tip: Investing smaller amounts of money into more startups is another way increase the chances of landing on a winning angel investment.
The best place to start is simply what you can manage. Start with 3 or 5 investments and work your way up. And a service like Angel Investing Inside can help you find deals to invest in.
However, once you get into the big-leagues — investing in 10-25 startups — you need to ensure you have a diverse group of startup investments.
Keeping a diverse set of investments is as important in the angel investing world as anywhere else.
Quantity will give you some inherent diversification, but it is important to focus on other dimensions as well.
You can diversify your startup investments by investing in:
Through diversification, you mitigate risk. You don’t need to spend hours on due diligence if you have a good eye for talent and maintain a diverse portfolio of startups.
If you invested exclusively into the hospitality and tourism industries pre-COVID-19, your entire investment strategy would have collapsed.
But, if you had some investments in hospitality, some in medicine, some in education, you could have averted a crisis — maybe even turned a profit.
Likewise, by investing in some young startups and some mature, you will have an even spread of returns over time, some coming in 3 years, some 5, and some 10. You will be able to flip your profit back into investments steadily, rather than waiting for everything to happen at once.
By diversifying across many dimensions, you make up for your personal faults and bad habits, changes in the market, and open yourself up for a steady, profitable investing future.
Now that you understand the importance of quantity and diversification in startup investing, the last step is to figure out how to get enough good deals to keep the strategy afloat.
You can’t just throw your money around. It won’t matter how many startups you invest in if you don’t know the difference between a hit and a miss.
One of the most sure-fire ways to find high-potential deals is to boost your deal-flow through an angel investing network.
You probably heard the saying ‘Don’t Fight the Fed.’
But have you ever wondered how exactly they force stock prices higher?
It’s not like they go out and just buy equities outright…
…even though some conspiracy theories would lead you to believe this.
If that’s not the case, how exactly does the money sleight of hand work?
Two words – Opportunity Cost
It’s why stocks rise swiftly even during the worst economy in a century.
And it’s also why the words and actions of the Fed matter more than any other macroeconomic factor right now.
Because what’s riskier right now – a 10-year bond that pays next to 0% or a 3% dividend stock?
Now you see the dilemma that faces investors, allow me to explain more.
Back in the early 1980s, the 10-year treasury rate paid over 15%.
Guess what it pays today?
With the Federal Reserve dropping interest rates and buying mass quantities of treasuries, they drove bond prices up and their corresponding yields down.
This isn’t some new phenomenon either. It’s been happening over decades.
You would have thought we learned our lessons about cheap debt from the Great Recessions. Except our solution to that problem was even cheaper debt.
Imagine being an insurance company trying to meet your obligations through conservative investments in various bonds.
With such a horrid interest rate, how would you do that?
Low interest rates create a paradox for investors.
It lowers the cost of debt, allowing companies to expand by borrowing, or at the very least stay afloat. Investors in that debt now get less for their money.
So, they go hunting for yield. At some point, the risk in equities is offset by the lack of another opportunity in bonds. In turn, they buy stocks because they are the least worst option.
This is a question we just started to answer before the pandemic. At the end of 2018, the Fed raised rates much faster than the market was willing to tolerate, creating a massive selloff into Christmas.
Backtracking their moves, the Fed held rates at a constant, but extremely low level. They wanted to drive more inflation into the economy.
Inflation occurs when the demand for something increases faster than supply, driving up prices.
Except, that hasn’t happened in the last decade. A combination of factors including technological advances have increased supply with demand, keeping prices in check.
It’s led to a baffling global scenario, where central banks around the world tried to lower their interest rates out of it.
While that should have led to runaway inflation, so far, we’ve seen none of it.
That’s led the Federal Reserve and other central banks to keep interest rates low, which in turn drives down treasury interest rates, which then incentivizes investors to pour money into stocks.
So how long can this last?
As long as the Fed wants it to!
That doesn’t mean stocks go up forever. But it creates a floor that has lovingly been referred to as ‘the Fed put.’
Intraday traders might not find this useful. But swing traders absolutely will. Knowing there’s a floor provides the bulls with ammo to buy up pullbacks.
You’re probably wondering why the markets cratered in March.
As we watched the free-fall, the Fed took several weeks before they came out and acted in two important ways.
First, they lowered interest rates. That is great when there’s demand, but the real worry at the time was companies going bankrupt. They needed debt just to make it through the day.
That’s where their second action, direct purchases of treasuries, and asset-backed securities in sufficient quantity stabilized the market.
Eventually, they began buying the actual debt of publicly traded companies. But, when they implemented their second action, they communicated they would do whatever it took to stabilize the credit markets.
In this case, it meant making sure companies that needed to borrow to survive could do so.
Right or wrong, that will be for history to decide.
At the moment, it’s driven equities back to their all-time highs for companies not as hard hit by the pandemic such as Apple, Amazon, Netflix, and the like.
And, as long as the Fed continues to support the debt markets, there will be plenty of zombie companies (those alive only because of cheap debt) that continue operations.
That’s why I not only look for news around the Fed, but choose my trades carefully based on this information.
In fact, it’s one of the main reasons I traded gold miners (GDX) recently.
As the Fed devalues our currency, hard assets will benefit.
It’s exactly why I began picking up call options using the same techniques I talk about in my Total Alpha Masterclass.
And you can get in on the action by signing up today, right here.